What changed in this filing

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Item 1. Business

2023-02-22 compared with 2022-02-23 · 208 added, 183 removed, 363 unchanged (52% of the section changed)

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Our purpose is to unite caring with discovery to create medicines that make life better for people around the world.

Most of the products we sell today were discovered or developed by our own scientists, and our long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative new medicines.

Most of the products that we sell today were discovered or developed by our own scientists, and our long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative medicines.

We manufacture and distribute our products through facilities in the United States (U.S.), including Puerto Rico, and 7 other countries.

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to reduce the risk of cardiovascular death in adult patients with type 2 diabetes and established cardiovascular disease;

and to reduce the risk of cardiovascular death and hospitalizations for heart failure in adults with heart failure and reduced ejection fraction.

• Trajenta ® , in collaboration with Boehringer Ingelheim, for the treatment of type 2 diabetes.

• Trulicit y ® , for the treatment of type 2 diabetes and to reduce the risk of major adverse cardiovascular events in adult patients with type 2 diabetes and established cardiovascular disease or multiple cardiovascular risk factors.

and to reduce the risk of cardiovascular death and hospitalizations for heart failure in adults.

• Mounjaro ® , a glucose-dependent insulinotropic polypeptide and glucagon-like peptide-1 receptor agonist, for the treatment of adults with type 2 diabetes in combination with diet and exercise to improve glycemic control.

• Trulicit y ® , for the treatment of type 2 diabetes in adults and pediatric patients 10 years of age and older, and to reduce the risk of major adverse cardiovascular events in adult patients with type 2 diabetes and established cardiovascular disease or multiple cardiovascular risk factors.

Oncology products , including:

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and as monotherapy, in combination with chemotherapy, or in combination with radiation therapy for the treatment of certain types of head and neck cancers.

• Retevmo ® , for the treatment of metastatic NSCLC in adult patients;

for the treatment of advanced metastatic medullary thyroid cancer who require systemic therapy in adult and pediatric patients;

and for the treatment of advanced metastatic thyroid cancer in adult and pediatric patients who require systemic therapy and are radioactive iodin-refractory.

• Tyvyt ® , in collaboration with Innovent Biologics, Inc., for the treatment of relapsed or refractory classic Hodgkin's lymphoma and for the first-line treatment of non-squamous NSCLC in combination with Alimta and another agent in China.

• Verzenio ® , for use as monotherapy or in combination with endocrine therapy for the treatment of HR+, HER2- metastatic breast cancer and in combination with endocrine therapy for treatment of HR+, HER2-, node positive, early breast cancer at high risk of recurrence and a Ki-67 score at least 20%, as determined by a U.S.

• Jaypirca TM , for the treatment of adult patients with relapsed or refractory mantle cell lymphoma (MCL) after at least two lines of systemic therapy, including a BTK inhibitor.

• Retevmo ® , for the treatment of metastatic NSCLC with a rearranged during transfection (RET) gene fusion in adult patients;

for the treatment of advanced metastatic medullary thyroid cancer with a RET mutation who require systemic therapy in adult and pediatric patients;

for the treatment of advanced or metastatic thyroid cancer with a RET gene fusion in adult and pediatric patients who require systemic therapy and are radioactive iodine-refractory;

and for the treatment of adult patients with locally advanced or metastatic solid tumors with a RET gene fusion that have progressed on or following prior systemic treatment or who have no satisfactory alternative treatment options.

• Tyvyt ® , in collaboration with Innovent Biologics, Inc., for the treatment of relapsed or refractory classic Hodgkin's lymphoma;

for the first-line treatment of non-squamous NSCLC in combination with Alimta and another agent;

for the first-line treatment of squamous NSCLC in combination with two other agents;

for the first-line treatment of hepatocellular carcinoma in combination with another agent;

for the first-line treatment of esophageal squamous cell carcinoma in combination with certain other agents;

and for the first-line treatment of gastric cancer in combination with two other agents, each in China.

Food and Drug Administration (FDA) approved test.

Immunology products , including:

• Olumiant ® , in collaboration with Incyte Corporation, for the treatment of adults with moderately-to-severely active rheumatoid arthritis and for moderate to severe atopic dermatitis.

• Baricitinib was granted Emergency Use Authorization (EUA) in 2021 for the treatment of COVID-19 in hospitalized adults and pediatric patients 2 years of age or older requiring supplemental oxygen, non-invasive or invasive mechanical ventilation, or extracorporeal membrane oxygenation.

• Olumiant ® , in collaboration with Incyte Corporation, for the treatment of adults with moderately-to-severely active rheumatoid arthritis, moderate to severe atopic dermatitis, and severe alopecia areata, and for the treatment of hospitalized adults with COVID-19 who require supplemental oxygen, mechanical ventilation, or extracorporeal membrane oxygenation.

• Taltz ® , for the treatment of adults and pediatric patients aged 6 years or older with moderate-to-severe plaque psoriasis, adults with active psoriatic arthritis, adults with ankylosing spondylitis, and adults with active non-radiographic axial spondyloarthritis.

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• Zyprexa ® , for the treatment of schizophrenia, acute mixed or manic episodes associated with bipolar I disorder, and bipolar maintenance.

Other therapies , including:

• Bamlanivimab and etesevimab , administered together, for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients from birth to 12 years old with positive results of direct SARS-CoV-2 viral testing and who are at high risk for progression to severe COVID-19, including hospitalization or death (EUA granted in 2021).

In January 2022, the FDA revised the EUA for bamlanivimab and etesevimab administered together to limit their use to only when the patient is likely to have been infected with or exposed to a variant that is susceptible to this combination treatment.

Other products and therapies , including:

In May 2022, the FDA announced that bamlanivimab and etesevimab are not currently authorized for emergency use for any U.S.

• Bebtelovimab , for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients (12 years of age and older and weighing at least 40 kilograms) with positive results of direct SARS-CoV-2 viral testing, and who are at high risk for progression to severe COVID-19, including hospitalization or death, and for whom alternative COVID-19 treatment options approved or authorized by the FDA are not accessible or clinically appropriate (EUA granted in 2022).

In November 2022, the FDA announced that bebtelovimab is not currently authorized for emergency use for any U.S.

• Cialis ® , for the treatment of erectile dysfunction and benign prostatic hyperplasia.

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We promote our major products in the U.S.

through sales representatives who engage with physicians and other health care professionals.

We also educate healthcare providers about our products in various other ways, including promoting in online health care channels, distributing literature and samples of certain products to physicians, and exhibiting at medical meetings.

through sales representatives who engage with physicians and other healthcare professionals.

We also educate healthcare providers about our products in various other ways, including promoting in online channels, distributing literature and samples of certain products to physicians, and exhibiting at medical meetings.

In addition, we advertise certain products directly to consumers in the U.S., and we maintain websites and other media channels with information about our major products.

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We enter into arrangements with these organizations providing for discounts or rebates on our products.

In the U.S., most of our products are distributed through wholesalers that serve pharmacies, physicians and other health care professionals, and hospitals.

In 2021, 2020, and 2019, three wholesale distributors in the U.S.—McKesson Corporation, AmerisourceBergen Corporation, and Cardinal Health, Inc.—each accounted for between 15 percent and 20 percent of our consolidated revenue.

In the U.S., most of our products are distributed through wholesalers that serve pharmacies, physicians and other healthcare professionals, and hospitals.

In 2022, 2021, and 2020, three wholesale distributors in the U.S.—McKesson Corporation, AmerisourceBergen Corporation, and Cardinal Health, Inc.—each accounted for a significant percentage of our consolidated revenue.

No other customer accounted for more than 10 percent of our consolidated revenue in any of these years.

For additional information, see Item 8, "Financial Statements and Supplementary Data—Note 2:

Outside the U.S.

Outside the U.S., we promote our products to healthcare providers primarily through sales representatives and other health care channels.

While the products we market vary from country to country, diabetes products constitute the largest single group of our consolidated revenue.

Distribution patterns for our products also vary from country to country.

In most countries in which we operate, we maintain our own sales organizations, but in some smaller countries we market our products through third-party distributors, some of which we have engaged through distribution and promotion arrangements.

The products we market and distribution of our products vary from country to country.

Outside the U.S., we promote our products to healthcare providers through sales representatives and other channels.

In most countries in which we operate, we maintain our own sales organizations, but in some countries we market our products through third parties, some of which we have engaged through distribution and promotion arrangements.

Marketing Collaborations

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For example, we and Boehringer Ingelheim have a global agreement to develop and commercialize a portfolio of diabetes products, including Trajenta ® , Jentadueto ® , Jardiance, Glyxambi ® , Synjardy ® , Trijardy ® XR, and Basaglar.

For additional information, see Item 8, "Financial Statements and Supplementary Data - Note 4, Collaborations and Other Arrangements."

For additional information, see Item 8, "Financial Statements and Supplementary Data—Note 4:

Collaborations and Other Arrangements."

Our products compete globally with many other pharmaceutical products in highly competitive markets.

Important competitive factors include effectiveness, safety, and ease of use;

formulary placement, price, and demonstrated cost-effectiveness;

formulary placement, price, payer coverage and reimbursement rates, and demonstrated cost-effectiveness;

regulatory approvals;

marketing effectiveness;

and research and development of new products, processes, modalities, and uses.

Most new products that we introduce must compete with other branded, biosimilar, or generic products already on the market or that are later developed by competitors.

When competitors introduce new products or delivery systems with therapeutic or cost advantages, including by developing new modalities, our products become subject to decreased sales, progressive price reductions, or both.

Most new products or uses that we introduce must compete with other branded, biosimilar, or generic products already on the market or that are later developed by competitors.

When competitors introduce new products, uses, or delivery systems with therapeutic or cost advantages, including by developing new modalities, our products become subject to decreased sales volumes, progressive price reductions, or both.

We believe our long-term competitive success depends on discovering and developing (either alone or in collaboration with others) or acquiring innovative, cost-effective products that provide improved outcomes for patients and deliver value to payers, and continuously improving the productivity of our operations in a highly competitive environment.

There can be no assurance that our efforts will result in commercially successful products, and it is possible that our products will be, or will become, uncompetitive from time to time as a result of products developed by our competitors.

Generic Pharmaceuticals

One of the biggest competitive challenges we face is from generic pharmaceuticals.

and Europe, the regulatory approval process for pharmaceuticals (other than biological products (biologics)) exempts generics from costly and time-consuming clinical trials to demonstrate their safety and efficacy, allowing generic manufacturers to rely on the safety and efficacy of the innovator product.

As a result, generic manufacturers generally invest far fewer resources than we do in research and development and can price their products significantly lower than our branded products.

Accordingly, when a branded non-biologic pharmaceutical loses its market exclusivity, it normally faces intense price competition from generic forms of the product, which can cause us to lose a significant portion of the product's revenue in a very short period of time.

In the U.S., Europe, Japan, and other jurisdictions, the regulatory approval process for pharmaceuticals (other than biological products (biologics)) exempts generics from costly and time-consuming clinical trials to demonstrate their safety and efficacy, allowing generic manufacturers to rely on the safety and efficacy of the innovator product.

As a result, generic manufacturers generally invest far fewer resources than we do for our branded products in research and development and can price their products significantly lower than our branded products.

Accordingly, when a branded non-biologic pharmaceutical loses its market exclusivity, it normally faces intense price competition from generic forms of the product, which can result in the loss of a significant portion of the product's revenue in a very short period of time.

Moreover, governments in some countries leverage generic entrants to drive price concessions through the utilization of volume-based procurement bidding and other measures.

Further, public and private payers typically encourage the use of generics as alternatives to brand-name drugs in their healthcare programs.

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Where substitution is mandatory, it must be made unless the prescribing physician expressly forbids it.

In many countries outside the U.S., intellectual property protection is weak, and we must compete with generic or counterfeit versions of our products relatively shortly after launch.

In certain countries outside the U.S., intellectual property protection is weak, and we must compete with generic or counterfeit versions of our products relatively shortly after launch.

A number of our products and potential new medicines in our clinical-stage pipeline are biologics.

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Globally, most governments have developed abbreviated regulatory pathways to approve biosimilars as follow-ons to innovator-developed biologics, including the Biologics Price Competition and Innovation Act of 2009 (the BPCIA) in the U.S.

A number of biosimilars have been licensed under the BPCIA and in Europe.

A number of biosimilars have been licensed under the BPCIA, as well as in Europe and Japan.

The patent and regulatory exclusivity for the existing innovator biologic generally must expire in a given market before biosimilars may enter that market.

However, in the U.S., the product exclusivity period under the BPCIA could be affected by recent government proposals and litigation.

See "- Patents, Trademarks, and Other Intellectual Property Rights." In addition, the extent to which a biosimilar, once approved, will be substituted for the innovator biologic in a way that is similar to traditional generic substitution for non-biologic products is not yet entirely clear, and will depend on a number of regulatory and marketplace factors that are still developing.

In the U.S., currently only a biosimilar product that is determined to be "interchangeable" by the FDA will be considered substitutable for the original biologic product without the intervention of the health care provider who prescribed the original biologic product.

To prove that a biosimilar product is interchangeable, the applicant must demonstrate that the product can be expected to produce the same clinical results as the original biologic product in any given patient, and if the product is administered more than once in a patient, that safety risks and potential for diminished efficacy of alternating or switching between the use of the interchangeable biosimilar biologic product and the original biologic product is no greater than the risk of using the original biologic product without switching.

The FDA has begun to issue "interchangeable" designations for biosimilar products.

In addition, the extent to which a biosimilar, once approved, will be substituted for the innovator biologic in a way that is similar to traditional generic substitution for non-biologic products is not yet entirely clear, and will depend on a number of regulatory and marketplace factors that are still developing.

In the U.S., currently only a biosimilar product that is determined to be "interchangeable" by the FDA will be considered substitutable for the original biologic product without the intervention of the healthcare provider who prescribed the original biologic product.

The FDA requirements for interchangeability are evolving but the FDA has issued several "interchangeable" designations for biosimilar products, including for competitive insulin products, and is expected to continue doing so in the future.

Regulatory interpretation of important aspects of the laws regulating biosimilars continues to evolve and, therefore, the impact of these laws on our business remains subject to substantial uncertainty.

Biosimilars may present both competitive challenges and opportunities.

For example, a competitor company has developed a version of insulin lispro that competes with our product Humalog.

On the other hand, in collaboration with Boehringer Ingelheim, we developed Basaglar, an insulin glargine product, which has the same amino acid sequence as a product currently marketed by a competitor and has launched as a follow-on biologic in the U.S., and as a biosimilar in Europe and Japan.

However, in March 2020, the FDA began regulating all of our insulin products as "biologics" rather than "drugs." Based on FDA draft guidance, this change may lessen the amount of data required for competitor biosimilar products to enter the market, some of which could be designated as interchangeable and therefore substituted for our insulin products at U.S.

For example, in June 2020, the FDA approved a New Drug Application (NDA) for Semglee, a follow-on insulin glargine product that competes with Basaglar in the U.S., and, in July 2021, Semglee received additional FDA approval as a biosimilar that is interchangeable to its reference insulin glargine product.

The FDA's interpretation of important aspects of the laws regulating biosimilars continues to evolve and, therefore, the impact of these laws on our business remains subject to substantial uncertainty.

While competitors have developed biosimilars that compete with our products, we have developed, and may continue to develop, our own biosimilars.

Private Sector Dynamics

private sector, consolidation and integration among healthcare providers significantly affects the competitive marketplace for pharmaceuticals.

Health plans, managed care organizations, pharmacy benefit managers, wholesalers, and other supply chain stakeholders have been consolidating into fewer, larger entities, thus enhancing their purchasing strength and importance.

Private third-party insurers, as well as governments, typically maintain formularies that specify coverage (the conditions under which drugs are included on a plan's formulary) and reimbursement (the associated out-of-pocket cost to the consumer) to control costs by negotiating discounted prices in exchange for formulary inclusion.

private sector, consolidation and integration among healthcare organizations significantly affects the competitive marketplace for pharmaceuticals.

Formulary placement can lead to reduced usage of a drug for the relevant patient population due to coverage restrictions, such as prior authorizations and formulary exclusions, or due to reimbursement limitations that result in higher consumer out-of-pocket cost, such as non-preferred co-pay tiers, increased co-insurance levels, and higher deductibles.

Consequently, pharmaceutical companies face increased pressure in pricing and usage negotiation, and compete fiercely for formulary placement, not only on the basis of product attributes such as efficacy, safety profile, or patient ease of use, but also by providing rebates.

As payers and pharmaceutical companies continue to negotiate formulary placement and pricing, value-based agreements, where pricing is based on achievement (or not) of specified outcomes, are another tool that may become increasingly prevalent.

Price is an increasingly important factor in formulary decisions, particularly in treatment areas in which the payer has taken the position that multiple branded products are therapeutically comparable.

We expect these downward pricing pressures will continue to negatively affect our consolidated results of operations.

Consequently, pharmaceutical companies face increased pressure in negotiations, and compete fiercely for formulary placement, not only on the basis of product attributes such as efficacy, safety profile, or patient ease of use, but also by providing rebates or other concessions.

As payers and pharmaceutical companies continue to negotiate formulary placement and rebates, value-based agreements, where rebates may be based on achievement (or not) of specified outcomes, are another tool that has become increasingly prevalent.

Cost is an increasingly important factor in formulary decisions, particularly in treatment areas in which the payer has taken the position that multiple branded products are therapeutically comparable.

These pressures have negatively affected, and could continue to negatively affect, our consolidated results of operations.

In addition to formulary placement, changes in insurance designs continue to drive greater consumer cost-sharing through high deductible plans and higher co-insurance or co-pays.

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Patents, Trademarks, and Other Intellectual Property Rights

Intellectual property protection is critical to our ability to successfully commercialize our life sciences innovations and invest in the search for new medicines.

Intellectual property protection is critical to our ability to successfully commercialize our life sciences innovations and invest in the search for new medicines and uses.

We own, have applied for, or are licensed under, a large number of patents in the U.S.

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In addition, as discussed below, for some products we have effective intellectual property protection in the form of data protection under pharmaceutical regulatory laws.

The patent protection anticipated to be of most relevance to pharmaceuticals is provided by national patents claiming the active ingredient (the compound patent), particularly those in major markets such as the U.S., major European countries, and Japan.

The patent protection anticipated to be of most relevance to pharmaceuticals is provided by national patents claiming the active ingredient (the compound patent) for our products, particularly those in major markets such as the U.S., major European countries, and Japan.

These patents may be issued based upon the filing of international patent applications, usually filed under the Patent Cooperation Treaty (PCT).

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• Patent term adjustment is a statutory right available to all U.S.

patent applicants to provide relief in the event that a patent grant is delayed during examination by the United States Patent and Trademark Office (USPTO).

patent applicants to provide relief in the event that a patent grant is delayed during examination by the U.S.

Patent and Trademark Office (USPTO).

• Patent term restoration is a statutory right provided to U.S.

patent holders that claim inventions subject to review by the FDA.

To make up for a portion of the time invested in clinical trials and the FDA review process, a single patent for a pharmaceutical product may be eligible for patent term restoration.

Patent term restoration is limited by a formula and cannot be calculated until product approval due to uncertainty about the duration of clinical trials and the time it takes the FDA to review an application.

To compensate for a portion of the time invested in clinical trials and the FDA review process, a single patent for a pharmaceutical product may be eligible for patent term restoration.

Patent term restoration is determined by a formula that cannot be calculated until product approval due to the uncertainty of the duration of clinical trials and the time it takes the FDA to review an application.

There is a five-year cap on any restoration, and no patent's expiration date may be extended beyond 14 years from FDA approval.

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For example, Supplementary Protection Certificates are available to extend the life of a European patent up to an additional five years (subject to a 15-year cap from European Medicines Agency (EMA) approval).

Also, in Japan, South Korea, and Australia, patent terms can be extended up to five years, depending on the length of regulatory review and other factors.

Loss of effective patent protection for pharmaceuticals, especially for non-biologic products, typically results in the loss of effective market exclusivity for the product, which often results in severe and rapid decline in revenues for the product.

Also, in Japan, South Korea, Australia, and other jurisdictions, patent terms can be extended up to five years, depending on the length of regulatory review and other factors.

Loss of effective patent protection for pharmaceuticals, especially for non-biologic products, typically results in the loss of effective market exclusivity for the product, often leading to a severe and rapid decline in revenues for the product.

However, in some cases the innovator company may retain exclusivity despite approval of the generic, biosimilar, or other follow-on versions of a new medicine beyond the expiration of the compound patent through manufacturing trade secrets, later-expiring patents on manufacturing processes, methods of use or formulations, or data protection that may be available under pharmaceutical regulatory laws.

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If granted, this "pediatric exclusivity" provides an additional six months of exclusivity, which is added to the term of data protection and, for products other than biologics, to the term of any relevant patents, to the extent these protections have not already expired.

While the term of the pediatric exclusivity attaches to the term of any relevant patent, pediatric exclusivity is a regulatory exclusivity—i.e., a bar to generic or biosimilar approval, not a patent right.

While the term of the pediatric exclusivity begins upon the expiration of the relevant patent, pediatric exclusivity is a regulatory exclusivity—i.e., a bar to generic or biosimilar approval, not a patent right.

• Under the U.S.

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Unlike pediatric exclusivity, the orphan exclusivity period is independent of and runs in parallel with any applicable patents.

Outside the major markets, the adequacy and effectiveness of intellectual property protection for pharmaceuticals varies widely, and in a number of these markets we are unable to patent our products or to enforce the patents we receive for our products.

Under the Trade-Related Aspects of Intellectual Property Agreement (TRIPs) administered by the World Trade Organization, more than 140 countries have agreed to provide non-discriminatory protection for most pharmaceutical inventions and to assure that adequate and effective rights are available to patent owners.

Certain developing countries limit protection for biopharmaceutical products under their interpretation of "flexibilities" allowed under the agreement.

Under the Trade-Related Aspects of Intellectual Property (TRIPs) Agreement administered by the World Trade Organization, more than 140 countries have agreed to provide non-discriminatory protection for most pharmaceutical inventions and to assure that adequate and effective rights are available to patent owners.

Certain developing countries limit protection for biopharmaceutical products under their interpretation of "flexibilities" allowed under the TRIPs Agreement.

Thus, some types of patents, such as those on new uses of compounds or new forms of molecules, are not available in certain developing countries.

Further, many developing countries, and some developed countries, do not provide effective data package protection even though it is specified in TRIPs.

Further, many developing countries, and some developed countries, do not provide effective data package protection even though it is specified in the TRIPs Agreement.

Our Intellectual Property Portfolio

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patent protection or data protection and associated expiry dates for our major or recently launched patent-protected marketed products are as follows:

• Alimta is protected by pediatric exclusivity (2022).

See Item 8, "Financial Statements and Supplementary Data - Note 16, Contingencies," for information regarding our settlement agreement with Eagle Pharmaceuticals, Inc.

and its impact on our exclusivity for Alimta.

• Baqsimi ® is protected by data protection (2022).

• Cyramza is protected by a compound patent and biologics data protection (2026).

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• Jardiance, and the related combination product Glyxambi, is protected by a compound patent (2028).

• Jaypirca is protected by a compound patent (2037) and by data protection (2028).

• Mounjaro is protected by a compound patent (2036) and by data protection (2027).

• Olumiant is protected by a compound patent (2032).

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• Trulicity is protected by a compound patent (2027) and by biologics data protection (2027).

• Verzenio is protected by a compound patent (2031) and by data protection (2022).

• Verzenio is protected by a compound patent (2031).

Outside the U.S., important patent protection or data protection includes:

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• Jardiance is protected by a compound patent in major European countries (2029) and Japan (2030).

• Mounjaro is protected by a compound patent in major European countries (2037) and Japan (2040).

• Olumiant is protected by a compound patent (2032) and by data protection (2027) in major European countries, and by a compound patent (2033) and by data protection (2025) in Japan.

• Retevmo is protected by a compound patent (2037) and by data protection (2031) in major European countries, and by a compound patent (2038) and by data protection (2029) in Japan.

• Reyvow is protected by a compound patent ( 2026 ) and by data protection ( 2032 ) in Japan.

• Reyvow is protected by data protection (2032) in major European countries, and a compound patent ( 2028 ) and by data protection ( 2032 ) in Japan.

• Taltz is protected by a compound patent (2031) and data protection (2027) in major European countries and a compound patent (2030) and data protection (2024) in Japan.

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• Verzenio is protected by a compound patent (2033) and data protection (2028) in major European countries and by a compound patent (2034) and data protection (2026) in Japan.

The following product candidates are currently under regulatory review.

The following product candidates are the most relevant currently under regulatory review.

Upon approval, we expect relevant compound patent and data protections to apply:

• We have commenced a rolling submission in the U.S.

for donanemab for the treatment of Alzheimer's disease.

• We have commenced a rolling submission in the U.S.

for pirtobrutinib (LOXO-305) for the treatment of mantle cell lymphoma.

• Reyvow has been submitted for regulatory review in certain major European countries for the acute treatment of migraine.

• Tirzepatide has been submitted for regulatory review in the U.S., in Japan, and in certain major European countries as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes.

Worldwide, we sell all of our major products under trademarks consisting of our product names, logos, and unique product appearances (e.g., the appearance of our Trulicity autoinjector) which we consider in the aggregate to be important to our operations.

• Donanemab has been submitted for regulatory review in the U.S.

for the treatment of early Alzheimer's disease.

In January 2023, the FDA issued a complete response letter for our accelerated approval submission.

Phase III trials are ongoing.

• Lebrikizumab has been submitted for regulatory review in the U.S.

and Europe for the treatment of atopic dermatitis.

• Mirikizumab has been submitted for regulatory review in the U.S., Europe, and Japan for the treatment of ulcerative colitis.

Worldwide, we sell all of our major products under trademarks consisting of our product names, logos, and unique product appearances (e.g., the appearance of our Trulicity autoinjector) that we consider in the aggregate to be important to our operations.

Trademark protection varies throughout the world, with protection continuing in some countries as long as the mark is used, and in other countries as long as it is registered.

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Most of our major products are not subject to significant license and collaboration agreements.

For information on our license and collaboration agreements, see Item 8, "Financial Statements and Supplementary Data - Note 4, Collaborations and Other Arrangements."

For information on our license and collaboration agreements, see Item 8, "Financial Statements and Supplementary Data—Note 4:

Collaborations and Other Arrangements."

Patent Challenges

In the U.S., the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, authorizes the FDA to approve generic versions of innovative pharmaceuticals (other than biologics, which are discussed below in more detail) when the generic manufacturer has not conducted safety and efficacy studies but files an Abbreviated New Drug Application (ANDA).

In an ANDA, the generic manufacturer must demonstrate only "pharmaceutical equivalence" and "bioequivalence" between the generic version and the NDA-approved drug—not safety and efficacy.

In an ANDA, the generic manufacturer must demonstrate only "pharmaceutical equivalence" and "bioequivalence" between the generic version and the New Drug Application (NDA)-approved-drug, not safety and efficacy.

Establishing pharmaceutical equivalence and bioequivalence is generally straightforward and inexpensive for the generic company.

Absent a patent challenge, the FDA cannot approve an ANDA until after certain of the innovator's patents expire.

However, after the innovator has marketed its product for four years, a generic manufacturer may file an ANDA alleging that one or more or all of the patents listed in the innovator's NDA are invalid or not infringed.

However, after the innovator has marketed its product for four years, a generic manufacturer may file an ANDA alleging that one or more of the patents listed in the innovator's NDA are invalid or not infringed.

This allegation is commonly known as a "Paragraph IV certification." If the innovator responds by filing suit against the generic manufacturer, the FDA is then prohibited from approving the generic company's application for a 30-month period (which can be shortened or extended by the trial court judge hearing the patent challenge).

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Under the BPCIA, the FDA cannot approve an application for a biosimilar product until data protection expires, 12 years after initial marketing approval of the innovator biologic, and an application may not be submitted until four years following the date the innovator biologic was first approved.

However, the BPCIA does provide a mechanism for a competitor to challenge the validity of an innovator's patents as early as four years after initial marketing approval of the innovator biologic.

The patent litigation scheme under the BPCIA, and the BPCIA itself, is complex and continues to be interpreted and implemented by the FDA as well as courts.

However, the BPCIA does provide a mechanism for a prospective biosimilar competitor to challenge the validity of an innovator's patents as early as four years after initial marketing approval of the innovator biologic.

The patent litigation scheme under the BPCIA, and the BPCIA itself, is complex and continues to be interpreted and implemented by the FDA, as well as by courts.

Courts have held that biosimilar applicants are not required to engage in the BPCIA patent litigation scheme and patent holders retain the right to bring suit under normal patent law procedures if a biosimilar applicant attempts to commercialize a product prior to patent expiration.

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The use of IPR proceedings after the institution of litigation pursuant to the BPCIA or Hatch-Waxman Act is currently a topic of debate among legislators.

We expect additional changes to the Patent Trial and Appeal Board (PTAB), including potentially to the policy to discretionarily deny an otherwise meritorious petition for IPR in light of a concurrent district court proceeding.

See "Risk Factors—Risks Related to Our Business—Our long-term success depends on intellectual property protection;

We have also observed, and may continue to observe, changes at the Patent Trial and Appeal Board (PTAB), including with respect to the PTAB's policy to discretionarily deny an otherwise meritorious petition for IPR in light of a concurrent district court proceeding.

See Item 1A, "Risk Factors—Risks Related to Our Business—Our long-term success depends on intellectual property protection;

if our intellectual property rights are invalidated, circumvented, or weakened, our business will be adversely affected."

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In recent years, we have experienced an increase in patent challenges from generic manufacturers in many countries outside the U.S.

For more information on administrative challenges and litigation involving our intellectual property rights, see Item 8, "Financial Statements and Supplementary Data - Note 16, Contingencies."

For more information on administrative challenges and litigation involving our intellectual property rights, see Item 8, "Financial Statements and Supplementary Data—Note 16:

Contingencies."

Government Regulation of Our Operations

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Evolving regulatory priorities have intensified governmental scrutiny of our operations, including with respect to current Good Manufacturing Practices (cGMP), quality assurance, and similar regulations.

Compliance with the laws and regulations affecting the manufacture and sale of current products and the discovery, development, and introduction of new products will continue to require substantial effort, expense, and capital investment.

Compliance with the laws and regulations affecting the manufacture and sale of current products and the discovery, development, and introduction of new products and uses will continue to require substantial effort, expense, and capital investment.

Of particular importance to our business is regulation by the FDA in the U.S.

Pursuant to laws and regulations that include the Federal Food, Drug, and Cosmetic Act, the FDA has jurisdiction over all of our products and devices in the U.S.

and administers requirements covering the testing, safety, effectiveness, manufacturing, quality control, distribution, labeling, marketing, promotion, advertising, dissemination of information, and post-marketing surveillance of those products.

Following approval, our products remain subject to regulation by various agencies in connection with labeling, import, export, storage, recordkeeping, advertising, promotion, and safety reporting.

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The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after a product reaches the market.

The FDA strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market.

Pharmaceutical products may be promoted only for the approved indications and in accordance with the provisions of the approved label.

The FDA also strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market.

Pharmaceutical products may be promoted only for approved indications and in accordance with the provisions of the approved label.

The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.

The FDA extensively regulates all aspects of manufacturing quality for pharmaceuticals under its cGMP regulations.

Outside the U.S., our products and operations are subject to similar regulatory requirements, notably by the EMA in Europe, the Ministry of Health, Labor and Welfare in Japan, and the National Medical Products Administration in China.

Specific regulatory requirements vary from country to country.

Regulatory requirements and approval processes outside the U.S.

may differ from those in the U.S.

Regulatory and compliance requirements, as well as approval processes outside the U.S., may differ from those in the U.S.

and may involve additional costs, uncertainties, and risks.

We make substantial investments of capital and operating expenses to implement comprehensive, company-wide quality systems and controls in our manufacturing, product development, and process development operations in an effort to maintain sustained compliance with cGMP and similar regulations.

However, in the event we fail to adhere to these requirements, we become subject to potential government investigations, regulatory and legal actions, product recalls and seizures, fines and penalties, interruption of production leading to product shortages, import bans or denials of import certifications, delays or denials in new product approvals, and reputational harm, any of which would adversely affect our business.

Certain of our products are manufactured by third parties, and their failure to comply with these regulations could adversely affect us, including through failure to supply product to us or delays in new product approvals.

Any determination by the FDA or other regulatory authorities of manufacturing or other deficiencies could adversely affect our business.

The FDA and other regulatory agencies outside the U.S.

extensively regulate all aspects of manufacturing quality for pharmaceuticals under their cGMP regulations.

However, in the event we fail to adhere to these requirements, we become subject to potential government investigations, regulatory and legal actions, product recalls and seizures, fines and penalties, interruption of production leading to product shortages, import bans or denials of import certifications, delays or denials in new product approvals or line extensions or supplemental approvals of current products pending resolution of the issues, and reputational harm, any of which would adversely affect our business.

Any determination by the FDA or other regulatory authorities of manufacturing or other deficiencies could adversely affect our business and reputation.

We are also subject to a variety of federal, state, local, and foreign environmental, health and safety, and other laws and regulations that may affect our research, development or production efforts.

Emergency Use Authorizations

The Secretary of Health and Human Services may authorize unapproved medical products to be manufactured, marketed, and sold in the context of an actual or potential emergency that has been designated by the government.

After an emergency has been announced, the Secretary of Health and Human Services may authorize EUAs for the use of specific products based on criteria established by statute, including that the product at issue may be effective in diagnosing, treating, or preventing serious or life-threatening diseases when there are no adequate, approved, and available alternatives.

An EUA is subject to additional conditions and restrictions, such as the obligation to provide fact sheets for healthcare providers administering the product and those to whom it is administered, adverse event monitoring and reporting, and recordkeeping and reporting requirements by product manufacturers.

The FDA may also establish additional discretionary conditions of authorization that the FDA deems necessary or appropriate to protect the public health, including conditions related to product distribution, product administration and data collection and analysis concerning the safety and effectiveness of the product.

In issuing an EUA, the FDA considers the totality of available scientific evidence regarding quality, safety and efficacy, including the known and potential risks of such products and the adequacy and availability of approved alternatives, among other factors.

An EUA is not a substitute for obtaining FDA approval, licensure, or clearance for use of a product.

The Secretary of Health and Human Services may issue an EUA to authorize unapproved medical products, or unapproved uses of approved medical products, to be manufactured, marketed, and sold in the context of an actual or potential emergency that has been designated by the government.

An EUA terminates when the emergency determination underlying the EUA terminates, and EUAs can be revoked under other circumstances, the timing of which may occur unexpectedly or be difficult to predict.

Outside the U.S., the emergency use of medical products is subject to regulatory processes and requirements that differ from those in the U.S.

Outside the U.S., the emergency use of medical products is subject to regulatory processes and requirements that vary and differ from those in the U.S.

The COVID-19 pandemic has been designated as a national emergency in the U.S.

On the basis of such determination, the Secretary of Health and Human Services declared that circumstances exist justifying the authorization of emergency use of drugs and biologics during the COVID-19 pandemic.

The FDA has granted EUAs for bamlanivimab and etesevimab administered together, baricitinib, and bebtelovimab, and similar actions have been taken by other regulators in certain jurisdictions outside the U.S.

However, the FDA has revised, and may in the future revise, any EUA for our COVID-19 antibodies in response to the prevalence of variants against which our antibodies have varying degrees of efficacy.

For example, in January 2022, the FDA revised the EUA for bamlanivimab and etesevimab administered together to limit their use to only when the patient is likely to have been infected with or exposed to a variant that is susceptible to this combination treatment.

On the basis of such determination, the FDA granted EUAs for bamlanivimab and etesevimab administered together, certain COVID-19-related uses of baricitinib, and bebtelovimab, and similar actions have been taken by other regulators in certain jurisdictions outside the U.S.

However, the FDA has revised, and may in the future further revise, these EUAs in response to the changing conditions of the COVID-19 pandemic, such as the prevalence of variants against which our antibodies have varying degrees of efficacy.

In May and November 2022, respectively, the FDA announced that bamlanivimab and etesevimab are, and bebtelovimab is, not currently authorized for emergency use for any U.S.

Other Laws and Regulations

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These laws are administered by, among others, the Department of Justice, the Office of Inspector General of the Department of Health and Human Services, the Federal Trade Commission, the Office of Personnel Management, and state attorneys general.

Over the past several years, state, federal, and foreign governments, agencies, and other regulatory bodies have increased their oversight, enforcement activities, and coordination with respect to pharmaceutical companies, which has resulted in intensified scrutiny, corporate criminal sanctions, and substantial civil settlements in the pharmaceutical industry.

In December 2020, the Office of Inspector General of the U.S.

Department of Health and Human Services and the Centers for Medicare & Medicaid Services (CMS) issued final rules expanding and modifying existing, and adding new, regulatory "safe harbors" and exceptions, respectively, under the anti-kickback statute and the Ethics in Patient Referrals Act.

We are currently evaluating the impact, if any, these regulatory amendments will have upon becoming effective on our consolidated results of operations, liquidity, and financial position, which is uncertain at this time.

State, federal, and foreign governments, agencies, and other regulatory bodies are active in their oversight, enforcement activities, and coordination with respect to pharmaceutical companies, which has resulted in intensified scrutiny, litigation costs, corporate criminal sanctions, and substantial civil settlements in the pharmaceutical industry.

Foreign Corrupt Practices Act of 1977 (FCPA) prohibits certain individuals and entities, including U.S.

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publicly traded companies.

As noted above, outside the U.S., our business is heavily regulated and therefore involves significant interaction with foreign officials.

As noted above, our business is heavily regulated and therefore involves significant interaction with officials outside the U.S.

Additionally, in many countries outside the U.S., healthcare providers who prescribe pharmaceuticals are employed by the government and purchasers of pharmaceuticals are government entities;

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We are, and could in the future become, subject to administrative and legal proceedings and actions, which could include claims for civil penalties (including treble damages under the False Claims Act), criminal sanctions, and administrative remedies, including exclusion from U.S.

federal and other health care programs.

It is possible that an adverse outcome in future actions could have a material adverse impact on our consolidated results of operations, liquidity, and financial position.

federal and other healthcare programs.

It is possible that an adverse outcome in future actions could have a material adverse impact on our consolidated results of operations, liquidity, and financial position in any given period.

Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access

There continues to be considerable public and government scrutiny of pharmaceutical pricing, and measures to address the perceived high cost of pharmaceuticals are being considered at various levels of state and federal government.

There continues to be considerable public and government scrutiny of pharmaceutical pricing.

In addition, U.S.

government action to reduce federal spending on entitlement programs, including Medicare and Medicaid, may affect payment for our products or services associated with the provision of our products.

Additionally, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drug products.

Restrictive or unfavorable pricing, coverage, or reimbursement determinations for our medicines or product candidates by governments, regulatory agencies, or private payers could also adversely impact our business and financial results.

For example, in January 2022, the CMS proposed a national coverage determination (NCD) decision memorandum stating that the proposed NCD would cover FDA approved monoclonal antibodies that target amyloid for the treatment of Alzheimer's disease for people with Medicare only if they are enrolled in qualifying clinical trials (the Alzheimer’s Monoclonal Antibody NCD).

If finalized in its current form, the proposed Alzheimer’s Monoclonal Antibody NCD would result in reduced coverage for, and negatively impact, our product candidate donanemab, and may negatively impact our business and financial results.

The regulatory priorities of the current U.S.

presidential administration could further intensify these efforts, which could have a material adverse impact on our business.

In the U.S., we are required to provide rebates to the federal government and respective state governments on their purchases of our pharmaceuticals under various federal and state healthcare programs, including state Medicaid and Medicaid Managed Care programs (minimum of 23.1 percent plus adjustments for price increases over time) and discounts to private entities who treat patients in certain types of health care facilities intended to serve low-income and uninsured patients (known as 340B facilities).

No rebates are required at this time in the Medicare Part B (physician and hospital outpatient) program where reimbursement is set on an "average sales price plus 4.3 percent" formula.

government actions to reduce federal spending on entitlement programs, including Medicare and Medicaid, may affect payment for our products or services associated with the provision of our products.

In August 2022, the U.S.

government enacted the Inflation Reduction Act of 2022 (IRA).

Among other measures, the IRA will require the U.S.

Department of Health and Human Services to effectively set prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D.

Generally, these government prices apply nine (medicines approved under an NDA) or thirteen (medicines approved under a Biologics License Application) years following initial FDA approval and will be capped at a statutory ceiling price that is likely to represent a significant discount from average prices to wholesalers and direct purchasers.

It is too soon to tell how the U.S.

government will set these prices as the law specifies a ceiling price, but not a minimum or floor price.

One or more of our significant products may be selected, which would have the effect of accelerating revenue erosion prior to patent expiry.

The effect of reducing prices and reimbursement for certain of our products would significantly impact our business and consolidated results of operations.

The establishment of payment limits or other restrictions by drug affordability review boards and other state level actors would similarly impact us.

Other IRA provisions provide for rebate obligations on drug manufacturers that increase prices of Medicare Part B and Part D medicines at a rate greater than the rate of inflation and Part D benefit redesign that includes replacing the Part D coverage gap discount program with a new manufacturer discounting program.

Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil monetary penalties, which could be significant.

The IRA takes effect progressively starting in 2023, with the first government-set prices effective in 2026.

The IRA may meaningfully influence our business strategies and those of our competitors.

In particular, the nine-year timeline to set prices for medicines approved under an NDA may reduce the attractiveness of investment in small molecule innovation.

The implications to us of a competitor’s product being selected for price setting are also uncertain.

Provisions of the IRA may be subject to legal challenges or other reformation, and the full impact of the IRA on our business and the pharmaceutical industry remains uncertain.

Heightened governmental scrutiny over the manner in which drug manufacturers price their marketed products has also resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.

Restrictive or unfavorable pricing, coverage, or reimbursement determinations for our medicines or product candidates by governments, regulatory agencies, courts, or private payers could also adversely impact our business and financial results.

For example, in April 2022, the Centers for Medicare & Medicaid Services issued the Monoclonal Antibodies Directed Against Amyloid for the Treatment of Alzheimer’s Disease national coverage determination (the Alzheimer's Monoclonal Antibody NCD) limiting coverage of FDA-approved monoclonal antibodies that target amyloid for the treatment of Alzheimer's disease for people with Medicare only if they are enrolled in qualifying clinical trials.

In its current form, the Alzheimer’s Monoclonal Antibody NCD would result in significantly reduced coverage for, and negatively impact, our product candidate donanemab, and may negatively impact our business and financial results.

Additional policies, regulations, legislation, or enforcement, including those proposed or pursued by the U.S.

Congress, the current U.S.

presidential administration, and regulatory authorities worldwide, could intensify these efforts and adversely impact our business and consolidated results of operations.

In the U.S., we are required to provide rebates to the federal government and state governments on their purchases of our pharmaceuticals under various federal and state healthcare programs, including state Medicaid and Medicaid Managed Care programs (minimum of 23.1 percent plus adjustments for price increases above the consumer price index over time) and discounts to private entities who treat patients in certain types of healthcare facilities intended to serve low-income and uninsured patients (known as 340B covered entities).

Additionally, an annual fee is imposed on pharmaceutical manufacturers and importers that sell branded prescription drugs to specified government programs.

Since 2019, the Bipartisan Budget Act has required manufacturers of brand-name drugs, biologics, and biosimilars to provide a discount of 70 percent of the cost of branded prescription drugs for Medicare Part D participants who are in the "doughnut hole" (the coverage gap in Medicare prescription drug coverage).

Beginning in October 2024, under the IRA the 70 percent discount will be replaced by a 10 percent discount for all Medicare Part D beneficiaries that have met their deductible and incurred out of pocket drug costs below a $2,000 threshold and a 20 percent discount for beneficiaries that have incurred out of pocket drug costs above the $2,000 threshold.

Rebates are also negotiated in the private sector.

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Our approach to the rebates we offer to private payers that provide prescription drug benefits to seniors covered by Medicare may be impacted by the 2020 regulatory amendments to the anti-kickback statute's discount safe harbor, which have currently been stayed until at least January 1, 2032.

Pending legislation could repeal the amendments to the discount safe harbor.

Accordingly, their impact on our business is uncertain at this time.

For a discussion of risks related to how we price our products, see Item 1A, "Risk Factors—Risks Related to Our Business—We face litigation and investigations related to our products, how we price our products, and how we commercialize our products;

we could face large numbers of claims in the future, which could adversely affect our business, and we are self-insured for such matters."

Outside the U.S.

Globally, public and private payers are increasingly restricting access to pharmaceuticals based on assessments of comparative effectiveness and value, including through the establishment of formal health technology assessment processes.

In addition, third-party organizations, including professional associations, academic institutions, and non-profit entities associated with payers, are conducting and publishing comparative effectiveness and cost/benefit analyses on medicines, the impact of which are uncertain at this time.

In addition, third-party organizations, including professional associations, academic institutions, and non-profit entities associated with payers, conduct and publish comparative effectiveness and cost/benefit analyses on medicines, the impact of which are uncertain.

In most international markets, we operate in an environment of government-mandated cost-containment programs, which may include price controls, international reference pricing (to other countries' prices), discounts and rebates, therapeutic reference pricing (to other, often generic, pharmaceutical choices), restrictions on physician prescription levels, and mandatory generic substitution.

We may experience additional pricing pressures resulting from the financial strain of the COVID-19 pandemic on government-funded healthcare systems around the world.

In October 2022, the German Parliament passed cost cutting reforms and these reforms were followed by activation of a clawback mechanism in France and implementation of increased mandatory rebates in the United Kingdom.

These changes may be followed in 2023 by biopharmaceutical-focused austerity measures in more countries in Europe and in other markets.

Reforms, including those that may stem from periods of economic downturn or uncertainty, or as a result of high inflation, emergence or escalation of, and responses to, war or unrest (including the Russia-Ukraine war), or government budgeting priorities (including as exacerbated by the COVID-19 pandemic), may continue to result in added pressure on pricing and reimbursement for our products.

We cannot predict the extent to which our business may be affected by these or other potential future legislative, regulatory, or payer developments.

However, in general we expect to see continued focus on regulating pricing, resulting in additional state, federal, and international legislative and regulatory developments that could have further negative effects on pricing and reimbursement for our products.

See Item 7, "Management's Discussion and Analysis - Results of Operations - Executive Overview - Other Matters - Trends Affecting Pharmaceutical Pricing, Reimbursement, and Access" for additional information regarding recent legislative, administrative, and other pricing initiatives and their impact on our results.

See Item 7, "Management's Discussion and Analysis—Executive Overview—Other Matters—Trends Affecting Pharmaceutical Pricing, Reimbursement, and Access" for additional information regarding recent legislative, administrative, and other pricing initiatives and their impact on our results.

Research and Development

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At the end of 2022, we employed approximately 9,000 people in pharmaceutical research and development activities, including a substantial number of physicians, scientists holding graduate or postgraduate degrees, and highly skilled technical personnel.

Our internal pharmaceutical research focuses primarily on the areas of diabetes, immunology, neuroscience, and oncology.

During the past two years, we have also focused on researching and developing potential treatments for COVID-19.

Our internal pharmaceutical research focuses primarily on the areas of obesity & diabetes, immunology, neuroscience, and oncology.

At the outset of the COVID-19 pandemic, we also focused on researching and developing potential treatments for COVID-19.

In addition to discovering and developing new medicines, we seek to expand the value of existing products through new uses, formulations, and therapeutic approaches that provide additional value to patients.

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We believe our investments in research, both internally and in collaboration with others, have resulted in a robust pipeline of potential new medicines and new treatment indications in all stages of development.

We currently have approximately 45 new medicine candidates in clinical development or under regulatory review, and a larger number of projects in the discovery phase.

See Item 7, "Management's Discussion and Analysis - Results of Operations - Executive Overview - Late-Stage Pipeline," for more information on certain of our product candidates.

We have a number of new medicine candidates in clinical development or under regulatory review, and we have a larger number of projects in the discovery phase.

See Item 7, "Management's Discussion and Analysis—Executive Overview—Late-Stage Pipeline," for more information on our late-stage product candidates.

Raw Materials and Product Supply

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However, we obtain certain raw or intermediate materials primarily from only one source.

We generally seek to maintain sufficient inventory to supply the market until an alternative source of supply could be implemented, in the event one of these suppliers was unable to provide the materials or product.

However, various developments from time to time lead to interruption or shortages in supply until we establish new sources or, in some cases, implement alternative processes.

The majority of our revenue comes from products produced in our own facilities.

We generally seek to maintain sufficient inventory to supply the market until an alternative source of supply can be implemented, in the event one of these suppliers becomes unable to provide the materials or product.

However, various developments have led, and may in the future lead, to interruption or shortages in supply until we establish new sources, implement alternative processes, bring new manufacturing facilities online, or pause or discontinue product sales in one or more markets.

The majority of our revenue comes from products produced predominantly in our own facilities.

Our principal active ingredient manufacturing occurs at sites we own in the U.S., including Puerto Rico, and Ireland.

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We manage our supply chain (including our own facilities, contracted arrangements, and inventory) in a way that is intended to allow us to meet substantially all expected product demand while maintaining flexibility to reallocate manufacturing capacity to improve efficiency and respond to changes in supply and demand.

To maintain a stable supply of our products, we use a variety of techniques including comprehensive quality systems, inventory management, and back-up sites.

To maintain supply of our products, we use a variety of techniques, including comprehensive quality systems, inventory management, and back-up sites.

However, pharmaceutical production processes are complex, highly regulated, and vary widely from product to product.

Shifting or adding manufacturing capacity can be a very lengthy process requiring significant capital expenditures, process modifications, and regulatory approvals.

Accordingly, developments such as unplanned plant shutdowns, manufacturing or quality assurance difficulties at one of our facilities or contracted facilities, failure or refusal of a supplier or contract manufacturer to supply contracted quantities, increases in demand on a supplier, or difficulties in predicting or variability in demand for our products, from time to time lead to interruption or higher costs in the supply of certain products or product shortages.

Further, global transportation and logistics challenges, as well as tight labor markets, have caused, and in the future may cause, delays in, and/or increase costs related to, distribution of our medicines, the construction or acquisition of manufacturing capacity, procurement activity, and supplier or contract manufacturer arrangements.

For more information on the additional risks we face in connection with any difficulties, disruptions, and shortages in the manufacturing, distribution, and sale of our products, see "Risk Factors - Risks Related to Our Business - Manufacturing and supply chain difficulties, disruptions, or shortages could lead to product supply problems."

In addition, the strain on global transportation, logistics, and labor markets caused by the COVID-19 pandemic and an increase in overall demand in our industry for certain materials have had, and may continue to have, a number of impacts on our business, including increased costs to provide a consistent supply of our medicines where they are needed and disruptions in the supply of our medicines.

For more information, see Item 1A, "Risk Factors - Risks Related to Our Business - The COVID-19 pandemic has adversely impacted and may continue to adversely impact our business and operations.

We are currently unable to predict the full extent to which the COVID-19 pandemic or any future pandemic, epidemic, or similar public health threat will adversely impact our business and operations in the future." and Item 7, "Management's Discussion and Analysis - Results of Operations - Executive Overview - COVID-19 Pandemic."

Accordingly, developments such as unplanned plant shutdowns, manufacturing or quality assurance difficulties at one of our facilities or contracted facilities, failure or refusal of a supplier or contract manufacturer to supply contracted quantities, increases in demand on a supplier, or difficulties in predicting or variability in demand for our products and those of our competitors have led, and may in the future lead, to interruption or higher costs in the supply of certain products, product shortages, or pauses or discontinuations of product sales in one or more markets.

Further, global transportation and logistics challenges, cost inflation, and tight labor markets, have caused, and in the future may cause, delays in and/or increased costs related to distribution of our medicines, the construction or acquisition of manufacturing capacity, procurement activity, and supplier or contract manufacturer arrangements.

For more information on the additional risks we face in connection with any difficulties, disruptions, and shortages in the manufacturing, distribution, and sale of our products, see Item 1A, "Risk Factors—Risks Related to Our Business—Manufacturing, quality, or supply chain difficulties, disruptions, or shortages could lead to product supply problems."

In addition, cost inflation, the strain on global transportation, logistics, and labor markets (including as exacerbated by the COVID-19 pandemic and the emergence or escalation of, and responses to, war or unrest, including the Russia-Ukraine war), global economic downturns or uncertainty, and an increase in overall demand in our industry for certain products and materials have had, and may continue to have, a number of impacts on our business, including increased costs and disruptions in the supply of our medicines.

For more information, see Item 1A, "Risk Factors—Risks Related to Our Business—Public health outbreaks, epidemics, or pandemics, such as the COVID-19 pandemic, have adversely impacted and may in the future adversely impact our business and operations." and Item 7, "Management's Discussion and Analysis—Executive Overview—Other Matters—COVID-19 Pandemic."

Quality Assurance

Our success depends in great measure on customer confidence in the quality of our products and in the integrity of the data that support their safety and effectiveness.

Product quality arises from a total commitment to quality in all parts of our operations, including research and development, purchasing, facilities planning, manufacturing, distribution, and dissemination of information about our medicines.

Product quality requires a total commitment to quality in all parts of our operations, including research and development, purchasing, facilities planning, manufacturing, distribution, and dissemination of information about our medicines.

Quality of production processes involves strict control of ingredients, equipment, facilities, manufacturing methods, packaging materials, and labeling.

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Name Age Titles and Business Experience

Ricks 54 Chair, President, and Chief Executive Officer (CEO) (since 2017).

David Ricks 55 Chair, President, and Chief Executive Officer (CEO) (since 2017).

Previously, Mr.

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Ricks has 26 years of service with Lilly.

Anat Ashkenazi 49 Senior Vice President and Chief Financial Officer (since 2021).

Anat Ashkenazi 50 Executive Vice President and Chief Financial Officer (since 2021).

Previously, Ms.

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Ashkenazi has 21 years of service with Lilly.

Fry 56 Senior Vice President, Human Resources and Diversity (since 2011).

Eric Dozier 56 Executive Vice President, Human Resources and Diversity (since 2022).

Previously, Mr.

Fry held various leadership roles with Lilly, including vice president, human resources.

Fry has 34 years of service with Lilly.

Anat Hakim 52 Senior Vice President, General Counsel and Secretary (since 2020).

Dozier held various leadership roles with Lilly, including senior vice president, chief commercial officer for Loxo@Lilly, and vice president, global ethics and compliance officer.

Dozier has 25 years of service with Lilly.

Anat Hakim 53 Executive Vice President, General Counsel and Secretary (since 2020).

Prior to joining Lilly, Ms.

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Prior to joining WellCare, she served as divisional vice president and associate general counsel of intellectual property litigation at Abbott Laboratories from 2010 to 2013 and divisional vice president and associate general counsel of litigation from 2013 to 2016.

Hakim has two years of service with Lilly.

Edgardo Hernandez 47 Senior Vice President and President, Manufacturing Operations (since 2021).

Hakim has three years of service with Lilly.

Edgardo Hernandez 48 Executive Vice President and President, Manufacturing Operations (since 2021).

Previously, Mr.

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Hernandez has 18 years of service with Lilly.

Patrik Jonsson 55 Senior Vice President and President, Lilly Immunology, Lilly USA, and Chief Customer Officer (since 2021).

Patrik Jonsson 56 Executive Vice President and President, Lilly Immunology, Lilly USA, and Chief Customer Officer (since 2021).

Previously, Mr.

1 unchanged sentence

Jonsson has 32 years of service with Lilly.

Mason 55 Senior Vice President and President, Lilly Diabetes (since 2020).

Michael Mason 56 Executive Vice President and President, Lilly Diabetes (since 2020).

Previously, Mr.

1 unchanged sentence

Mason has 33 years of service with Lilly.

Norton 55 Senior Vice President, Global Quality (since 2017).

Johna Norton 56 Executive Vice President, Global Quality (since 2017).

Previously, Ms.

1 unchanged sentence

Norton has 32 years of service with Lilly.

Leigh Ann Pusey 59 Senior Vice President, Corporate Affairs and Communications (since 2017).

Leigh Ann Pusey 60 Executive Vice President, Corporate Affairs and Communications (since 2017).

Prior to joining Lilly, Ms.

Pusey was president and chief executive officer of the American Insurance Association from 2009 to 2017.

Pusey has four years of service with Lilly.

Diogo Rau 47 Senior Vice President and Chief Information and Digital Officer (since 2021).

Pusey has five years of service with Lilly.

Diogo Rau 48 Executive Vice President and Chief Information and Digital Officer (since 2021).

Prior to joining Lilly, Mr.

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Prior to his tenure at Apple, he served as a partner at McKinsey & Company.

Skovronsky, M.D., Ph.D.

48 Senior Vice President, Chief Scientific and Medical Officer, and President, Lilly Research Laboratories (since 2021).

Rau has two years of service with Lilly.

Daniel Skovronsky, M.D., Ph.D.

49 Executive Vice President, Chief Scientific and Medical Officer, and President, Lilly Research Laboratories (since 2021).

Previously, Dr.

1 unchanged sentence

Skovronsky has 12 years of service with Lilly.

Jacob Van Naarden 37 Senior Vice President, CEO Loxo Oncology at Lilly, and President, Lilly Oncology (since 2021).

Jacob Van Naarden 38 Executive Vice President, CEO, Loxo@Lilly, and President, Lilly Oncology (since 2021).

Previously, Mr.

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Van Naarden worked in various biotechnology investing, operating, and advisory capacities, including positions with HealthCor Management, Aisling Capital, and Goldman Sachs.

Van Naarden has three years of service with Lilly.

Alonzo Weems 51 Senior Vice President, Enterprise Risk Management, and Chief Ethics and Compliance Officer (since 2021).

Van Naarden has four years of service with Lilly.

Alonzo Weems 52 Executive Vice President, Enterprise Risk Management, and Chief Ethics and Compliance Officer (since 2021).

Previously, Mr.

1 unchanged sentence

Weems has 25 years of service with Lilly.

White 53 Senior Vice President and President, Lilly Neuroscience (since 2021).

Anne White 54 Executive Vice President and President, Lilly Neuroscience (since 2021).

Previously, Ms.

1 unchanged sentence

White has 27 years of service with Lilly.

Ilya Yuffa 47 Senior Vice President and President, Lilly International (since 2021).

Ilya Yuffa 48 Executive Vice President and President, Lilly International (since 2021).

Previously, Mr.

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We believe the strength of our workforce significantly contributes to our financial performance and enables us to make life better for people around the world.

For instance, most of the products we sell today were discovered or developed by our own scientists, and our long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative new medicines.

We believe that fostering a positive culture that values the contributions of our talented colleagues helps drive our success.

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We regularly conduct anonymous employee surveys to seek feedback from our workforce on a variety of topics.

These results are reviewed and analyzed by our leaders in order to implement changes to our policies and benefits designed to improve our employees' well-being.

These results are reviewed and analyzed by our leaders to identify opportunities to adjust our policies and benefits to improve our employees' experience.

As a result of our efforts, we believe that we have a highly performing, cohesive workforce and that our employee relations are good.

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The results of this research are reviewed by our senior leadership, and we deploy actions and activities in response to these insights to improve our workplace and corporate culture.

In 2020, as part of our DEI and community initiatives, Lilly and the Lilly Foundation launched the Racial Justice Commitment and pledged $25 million and 25,000 volunteer hours over five years to help decrease the burden of racial injustice and its effects on communities of color.

In 2020, as part of our DEI and community initiatives, Lilly and the Lilly Foundation launched the Racial Justice Commitment, with Lilly pledging 25,000 volunteer hours and the Lilly Foundation committing $25 million over five years to help decrease the burden of racial injustice and its effects on communities of color.

The Racial Justice Commitment aims to drive change across five areas:

internal people development, health equity, social impact, diversity partners, and family sustaining jobs, through the use of financial and people resources.

In 2021, we made progress in these efforts, including through the development of two apprenticeship programs at Lilly for individuals without college degrees.

Since 2017, we have committed to increasing the number of women, Black/African American, Latinx, and Asian populations in leadership roles, and we actively monitor our progress.

From 2020 through 2022, we have made progress in these efforts, including nearly tripling our spending with Black-owned businesses, committing over $98 million in minority-led venture capital firms, serving over 30,000 volunteer hours to advance racial justice initiatives, and expanding our Skills First Program at Lilly for individuals without four-year college degrees.

Since 2017, we have committed to increasing women, Black/African American, Latinx, and Asian representation in leadership roles, and we actively monitor our progress.

From the end of 2018 through the end of 2022, we increased the percentage of women in management globally from 42 percent to 49 percent.

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Our focus on DEI is also evident at our executive committee and board of directors.

Five of 15 current members (approximately 33 percent) of our executive committee (which includes our CEO) are women and two are MGM.

In addition, as of the filing of this report, the company's 13-member board of directors includes four women and six members who are MGMs.

Our efforts in DEI and workplace benefits have garnered numerous recognitions, including, in 2021, Top 50 Companies for Diversity by DiversityInc., America's Best Employers for Diversity by Forbes, America's Most JUST Companies and Forbes JUST 100 by Forbes and JUST Capital, Perfect Score on the Human Rights Campaign Foundation Corporate Equality Index, World's Most Ethical Companies by Ethisphere, Leading Disability Employer by the National Organization on Disability, Top Employers by Science Magazine, and 100 Best Companies, Top Companies for Executive Women, Best Companies for Dads, and Best Companies for Multicultural Women by Working Mother Magazine.

Five of 15 current members (approximately 33 percent) of our executive committee (which includes our CEO) are women and three are MGMs.

In addition, as of the filing of this report, the company's 13-member board of directors includes five women and six members who are MGMs.

Our efforts in DEI and workplace benefits have garnered numerous recognitions, including, in 2022, Top 50 Companies for Diversity by DiversityInc., Top Companies for Board of Directors by DiversityInc., Top Companies for Supplier Diversity by DiversityInc., Top Companies for ESG by DiversityInc., America's Best Employers for Women by Forbes, Perfect Score on the Human Rights Campaign Foundation Corporate Equality Index, World's Most Ethical Companies by Ethisphere, Perfect Score on Disability Equity Index Best Places to Work by Disability:IN, Pharmaceutical Innovation Index, Zero Project Award for Access Lilly, and Top Companies for Executive Women, Best Companies for Multicultural Women, Best Companies for Dads, 70 percent and Higher Inclusion Index by Seramount.

Employee Development

We believe talent begins with the hiring process.

We believe attracting and retaining the best, diverse talent begins with the hiring process.

We therefore require hiring managers to consider a diverse pool of candidates and we strive to provide a diverse panel of interviewers for open positions.

We believe that hiring in this way helps ensure that people from all backgrounds have equal opportunity to advance their careers.

In early 2022, we launched Discover , a 12-month new employee onboarding program with multiple touchpoints designed to foster integration into Lilly, to accelerate learning in their new roles and to create connections to further a sense of belonging at Lilly.

Discover was shaped in part by external benchmarking, feedback from employees, and learnings from onboarding remotely during the COVID-19 pandemic.

We offer training to enable our employees to perform their duties in our highly regulated industry.

We also strive to cultivate a culture that promotes ongoing learning by encouraging employees to seek further education and growth experiences, helping them build rewarding careers.

We have introduced online programming to facilitate access to our learning and development offerings.

We have introduced online programming to facilitate access to our learning and development offerings in addition to our in-person programs.

Many training courses are designed to improve accessibility for people with disabilities and other unique needs.

Across Lilly, we are working to design learning experiences to be more inclusive and effective.

In addition, we have implemented tools and resources and improved our talent programs and processes to provide broad access to information and transparency regarding career development and advancement at Lilly.

In early 2022, we launched Discover , a 12-month new employee onboarding program with multiple touchpoints designed to foster integration into the Lilly culture, to accelerate learning in their new roles and to create connections to further a sense of belonging at Lilly.

Discover was shaped in part by external benchmarking, feedback from employees, and learnings from onboarding remotely during the COVID-19 pandemic.

Across Lilly, we are continuously working to design learning experiences to be more inclusive and effective.

In addition, we have implemented development tools and resources for all employees, improved our talent programs and processes to provide broader access to information, and increased transparency regarding career development and advancement at Lilly.

Employee resource groups (ERGs) are another important component of developing talent at Lilly.

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We have continued our efforts to create an inclusive workplace with the goal of ensuring that all employees feel safe to speak up and share their ideas at work.

Our Make it Safe to Thrive education and awareness program is designed to help employees and leaders understand how individual psychological safety can be created and enhanced and includes live and online training and a monthly video series.

In late 2022, we introduced a new version of Make it Safe to Thrive for leaders that continues to focus on psychological safety and creating an inclusive environment.

Leaders are provided the opportunity to work through challenging conversations and situations currently being navigated in the workplace.

Lilly is committed to fostering a culture of diversity and respect in the workplace—an environment free of discrimination, harassment, or retaliation of any kind.

In 2022, as part of our annual review of The Red Book (Lilly's comprehensive code of business conduct applicable to our board and all employees worldwide) and related policies and procedures, we revised the Global Conduct in the Workplace procedure to continue to help ensure that we maintain a respectful, safe, inclusive, and professional workplace.

In 2022, as part of our annual review of The Red Book and related policies and procedures, we revised the Global Conduct in the Workplace procedure to continue to help ensure that we maintain a respectful, safe, inclusive, and professional workplace.

Employee Health and Safety

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To do this, we assess and continuously attempt to improve our companywide safety performance to promote the well-being of employees and to help safeguard communities where we operate.

As the COVID-19 pandemic has evolved, we have taken various measures to protect and support the health and safety of our employees globally, including instituting travel restrictions and work-from-home arrangements, offering onsite testing and vaccination options where possible, and instituting safety precautions such as masking, social distancing, and enhanced cleaning practices.

To support employee well-being in the U.S., we also enhanced local benefits related to health care, childcare, and time off.

We believe this holistic approach and dedication to safety helps us be our best as we deliver on our company purpose to improve lives around the world.

As the COVID-19 pandemic has evolved, we have continued to take various measures (as necessary) to protect and support the health and safety of our employees globally.

We believe a holistic approach and dedication to safety helps us be our best as we deliver on our company purpose to improve lives around the world.

Information Available on Our Website

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Indianapolis, Indiana 46285

In addition, the Governance portion of our website includes our corporate governance guidelines, board of directors and committee information (including committee charters), and our articles of incorporation and bylaws.

In addition, the "Governance" section of our website includes our corporate governance guidelines, board of directors and committee information (including committee charters), and our articles of incorporation and bylaws.

The link to our corporate governance information is lilly.com/leadership/governance .

We routinely post important information for investors in the “Investors” section of our website, www.lilly.com .

We may use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD.

Accordingly, investors should monitor the “Investors” section of our website, in addition to following our press releases, filings with the SEC, public conference calls, presentations, and webcasts.

We may also use social media channels to communicate with investors and the public about our business, products and other matters, and those communications could be deemed to be material information.

The information contained on, or that may be accessed through, our website or social media channels, is not incorporated by reference into, and is not a part of, this Annual Report on Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business